Brightline’s foes ramp up fight in D.C.

Sometimes keeping big business under regulation can seem like trying to run down a 110-mph train. Sometimes, quite literally, as in the case of Brightline’s $3.5 billion high-speed rail project from Orlando to Miami.

Once more, Brightline opponents have taken their fight to Washington. On April 19, at the request of Congressman Brian Mast (R-Stuart), the House Committee on Oversight and Government Reform conducted a hearing addressing Brightline’s December 2017 Private Activity Bond (PAB) allocation.

PABs are federal-backed bonds that are intended to incentivize private infrastructure projects with tax exemption.

This is the third time Brightline has applied for PAB assistance. In 2014, Brightline applied for a $1.75 PAB, to fund both phases of their project. In 2015, Indian River and Martin counties sued to block the application, claiming the PAB was approved by DOT before a full environmental review was complete.

In December 2016, Brightline withdrew their initial application and replaced it with a smaller $600 million request, for just Phase I of their project (from Miami to West Palm Beach). Since the original application was now off the books, the suit by the counties was made moot, and was dismissed by U.S. District Court Judge Christopher Cooper. The smaller PAB allocation was promptly approved by DOT.

Last December, Brightline submitted a new application for $1.15 billion intended for Phase II (the segment that will connect West Palm Beach with Orlando), and was approved. The two applications together amount to the original request, and this was not lost on Martin and Indian River counties, who remounted their suit against the rail company. Once again they’re claiming that environmental impact with respect to Brightline has been overlooked, and they’re also questioning the legitimacy of Brightline’s PAB eligibility. The litigation is still pending.

The April 19 hearing was held to better determine Brightline’s PAB eligibility or lack thereof, and whether the $1.15 billion allocation was in keeping with congressional intent.

Since 2005, PABs have been given to infrastructure projects in any one of 15 categories, and in order to qualify for a PAB, Brightline needed to fit one of these groups. Though one of the categories is “high-speed intercity rail,” and would seem the most obvious fit for the company, their trains won’t run at the stipulated speed of 150 mph.

The category they applied under was “highway and freight rail transfer,” which may seem contrary to reason at first, until one considers DOT’s definition of a highway under this statute. Reading from a written testimony at the hearing, Grover Burthey, Deputy Assistant Secretary for Transportation Policy with DOT, defined this category as applying to any surface transportation project which has been allocated Title 23 funds, federal funds designed to finance highways.

That Brightline couldn’t be described as a “highway” or “freight rail transfer” is obvious, but according to Chairman Meadows, calling the company a “surface transportation project” may even be a stretch.

And whether Brightline has even received Title 23 funds is in question. Their claim is that because they currently share infrastructure with the Florida East Coast (FEC) corridor, and because in the past that corridor has received Title 23 funds for highway-crossing upgrades, amounting to about $9 million, Brightline qualifies for the PAB.

In the hearing, however, Brightline Chief Operating Officer Patrick Goddard admitted that neither Brightline or All Aboard Florida (its former DBA) received these funds, and that he wasn’t clear if these funds had been allocated to FEC before or after Brightline’s inception as All Aboard Florida.

Congressman Mast, a stalwart opponent of the rail company, referred to a long-running publicity statement from Brightline that they are a 100 percent privately funded company, specifically referring to a June 2017 Transportation and Infrastructure Committee Hearing where Mike Reininger, CEO of Florida East Coast Industries (FECI), Brightline’s parent company, stated in sworn testimony that Brightline was “100 percent funded by private investment capital.”

Brightline’s alleged eligibility for a PAB allocation was double-speak, said Mast. Either they have never received public funding, as they’ve maintained – in which case, they wouldn’t qualify for a PAB – or they have, in which case they’ve misled the general public.

Because of what he calls their duplicitous marketing and urgent safety concerns, since January Mast has called for Brightline’s PAB allocation to be blocked by the feds. The April 19 hearing is the third congressional hearing requested by Mast. In February, Mast requested another Transportation and Infrastructure Committee hearing to focus on safety concerns regarding Brightline.

Brightline’s PAB is the largest one allocated to date; most other allocations figuring in the hundreds of millions. According to Judge Cooper’s statement in the 2015 suit, the tax-exempt status of the $1.75 billion in PAB allocations could plausibly cost taxpayers about $600 million within 10 years. Reininger claimed at the June 2017 hearing that this would be a deference of tax revenue that would have been paid on those bonds, not the same thing as public financing.

Indian River County Attorney Dylan Reingold, one of the plaintiffs in the pending suit, introduced another topic of conversation to the hearing: the cost of maintaining highway grade crossings throughout the Treasure Coast. Though much of the new required safety features for Brightline’s expansion to Orlando will be built on Brightline’s dime, the maintenance of these safety features will fall on the local municipalities the train traverses.

FEC, which predates development in the Treasure Coast, has longstanding contracts with the communities that over time sprouted along its corridor, that obligate these communities to pay maintenance cost for highway-rail crossings. Brightline claims that since they’re engaged with a shared-use agreement with FEC, the contracts apply to the maintenance of their safety upgrades as well.

According to Don West, director of St. Lucie Public Works, St. Lucie County currently pays up to $350,000 annually in highway-rail crossing maintenance. Figures drawn up by their railroad consultant, Triad Railroad Consultants, project Brightline crossings could cost the county more than $1 million per year. West says that no agreement is yet on the books with Brightline, though they have had conversations with the rail company to share cost for maintenance – at least for a certain number of years at the beginning of Phase II operation.

In a follow-up letter Brightline submitted to the Subcommittee, at the request of Chairman Meadows, they said, “As an accommodation, with respect to certain counties that have not (sic) opposed the Brightline Project, Brightline has agreed to absorb the crossing maintenance cost for a specified number of years. We have not agreed to such an accommodation with respect to the counties who continue to sue us in an effort to impede or delay construction of this project.” The letter doesn’t state, however, which counties they’ve made this agreement with.

In this letter, Brightline also doubled down on the fact that they had received Title 23 funds for the project: “Since the planning process for the Brightline Project began in December 2011, the project has received approximately $9 million in funds … to improve railway-highway grade crossings and to prepare the rail corridor for the reintroduction of passenger service and other potential growth in rail traffic.” According to the letter, about $6 million in Title 23 funds went to Phase I, and about $3 million went to Phase II. The letter doesn’t explicitly state whether Brightline or FEC received the funds, nor when the two companies merged. Florida East Coast Industries (FECI), Brightline’s parent company, first announced plans to develop the high-speed passenger rail in March 2012.

Other issues brought up at the meeting were ongoing safety concerns, fire-rescue response times, and whether or not Brightline has influenced counties to adopt quiet zones. Goddard maintained on the stand that as far as Brightline was concerned, quiet zones are completely at the discretion of the municipalities through which the train traverses. Whether or not quiet zones are implemented, however, is a major concern for taxpayers, says Mast.

“This goes to the continued cost of this project, not just at the local level or potentially the state level, but also at the federal level” said Mast. “Just last week, the mayor of the city West Palm Beach was in my office, and she was asking very specifically that the federal government pay for increased infrastructure at every intersection, because they permitted every intersection as a quiet zone, as to avoid the outrage in their community at this train traveling through 30 times a day. And now they wish the federal government to pay to get those quiet zone-permitted intersections up to a higher quality because of the deaths that have occurred. This is just another example of where the federal government potentially gets on the hook for this line.”

In regard to quiet zones, West says that Brightline has asked if St. Lucie County would consider implementing quiet zones, but West continues, “At this point, we’re not in a position to make a decision on that yet, because we’re concerned that the safety issues really need to be addressed first. Of course, a train horn is a safety item, and it provides safety. So we want to make sure the project is safe when it’s up and running. At this point, it’s really premature to make that decision [regarding quiet zones].”

The Oversight and Government Reform hearing bodes well for Brightline opponents, and furthers the broadcast of their message. The hearing, which began with all due formality, quickly became contentious. In the end, the legislators seriously questioned whether DOT’s PAB allocation to Brightline was within congressional intent.

After the hearing, Florida Senator Debbie Mayfield (R-Melbourne) requested that Gov. Rick Scott place a 90-day moratorium on any Florida Development Finance Corporation (FDFC) funds going to Brightline, until Congress is able to better assess the legality of the company’s PAB allocation. Florida Sen. Marco Rubio has also sent a letter to Secretary of Transportation Elaine Chao asking her to better clarify DOT’s review process for Brightline’s PAB application and PABs in general, citing his concern that there are “transparency issues” with Brightline’s application.

The discussion in Washington may just be warming up. As Ranking Member Connolly pointed out, PABs are now beginning to be relied on more than ever, in light of recent federal infrastructure cuts. Quite possibly, very soon, this South Florida issue will find itself in the crossfire of a national debate.

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